According to a report from the Royal Institution of Chartered Surveyors (RICS), the UK is facing a major shortage of rental homes; 1.8 million by 2025 to be exact.
The study calculates that rising house prices will make home-ownership increasingly unaffordable for people to buy – all types of potential buyers - leading to an increase in demand for homes to rent.
However, following the introduction of new rules which have increased the cost of being a Buy-to-Let (BTL) landlord, including the new stamp duty rules for owners of more than one home, the growth of available rental properties is expected to slow. Indeed, RICS data already shows that 86% of landlords surveyed have no plans to increase their BTL portfolio while an increasing number of estate agents have reported a decline in BTL sales since May.
“It’s time for Theresa May to get out her hard hat,” said Jeremy Blackburn, the RICS head of policy said. “We are facing a critical rental shortage and need to get Britain building in a way that benefits a cross section of society, not just the fortunate few.”
In light of these new data, the RICS is urging Theresa May’s government to encourage more construction and also to reverse the stamp duty changes the previous chancellor of the exchequer George Osborne created. This, the RICS argues, should encourage an increase in private-sector buy-to-let landlords.
“With increasingly unaffordable house prices, the majority of British households will be relying on the rental sector in the future,” the RICS’ Blackburn said. “The Government must put in place the measures that will allow the rental sector to thrive.”
A reversal of the April stamp duty rules would certainly be a shot in the arm for the BTL investor market. But, building more homes has the potential to, eventually, lower house prices.
To that end, the Government’s announcements at the Tory party conference of a £5 billion injection into house building and property construction innovation, is certainly welcome news and suggests the Government are taking the ‘housing crisis’ seriously.
However, Brexit has become a bit of a fly in the ointment. If demand for UK properties of all tenures up and down the country remains slow or even falls, then land owners and home builders may take some convincing to build at the rate required to construct 1 million properties by 2020. After all, profit is at the heart of most business and if demand isn’t high then prices are less likely to rise which is likely to limit the pace of construction, no matter what the Government does.
But, given the importance attached to the housing announcements at the recent Conservative party conference, we can only hope the Government will stick to its promises and push for the homes that are very much needed in the UK. Failure to do so could see almost 2 million people without a home in less than 10 years and that’s a frightening prospect indeed.